Meaning of "patent pending" and possibility of patenting first

As Messrs. Winslow and Weinrieb have written, "patent pending" means that a patent application disclosing the something that's considered inventive about the product has been filed with a patent office somewhere in the world. If the competitor's patent application discloses and claims subject matter that meets the legal tests of patentability in the pertinent jurisdiction (e.g. U.S.A.) then it's likely they'll eventually (in the next few years) obtain a granted patent with legally enforceable claims.

If the patent application was filed within the preceding 18 months, then it's likely you'll have to guess what it says, i.e. teaches or discloses. After 18 months, most but not all U.S. patent applications are officially published, and become accessible via the Web (e.g. Google Patents). From that time onward, a patent attorney could help you prognosticate the likelihood of the competitor getting patent claims that could preclude your making, using, selling or importing your proposed product.

The answer to your specific question is different from what it would have been a few years ago. By the so-called America Invents Act, Congress amended U.S. patent law to change from a process that used to grant patents (more or less) to the "first person to invent" the subject matter into a process that henceforth grants patents to the "first inventor to file" a patent application for the subject matter.

The law varies a bit from country to country as to whether a publicly sold competitive product would preclude your getting your own patent. And as I suggested above, it would also make a difference what the competitor's pending patent application discloses or teaches. So the answer to your question would have to be "it depends" on a lot of specifics. These specifics could best be reviewed and then used to generate actionable advice by a patent attorney you engage.