OF COURSE IT'S FAIR! you need to add the better players that he dropped. once you drop your player, he's going to be on the waiver wire. if he continues, you continue. then after a couple of days, most of the good players won't be available. They'll be on waivers!!! that's the only way to stop it!
I agree with glenn. It will take more work on your part if you want to win, but it is legal. There are going to be only some many players that that is worth doing it with. I am in a league right now in the semifinals, and my opponent is doing it so I did it this week to neutralize. I really only had 1 or 2 players that I was even willing to drop, though.