I wonder if the algorithm will also realize a single person is running around reporting bad rep for a lot of people and dock their reputation.
Most likely , the system should detect it. It's just a matter of wether their system is set up to report it, which I suspect it is, most likely this will lead to a monitoring of the player rather than a direct action by the system though to verify.
Since it's easy to detect, but unlike groups trolling a good player or someone they don't like, it's not as easy to verify automatically if it's what's happening. After all people generally don't give good reports only bad reports so most people could be detected there, but malicious use/trolling should be easier to detect and be flagged for manual monitoring/verification.