I've just recently experienced this.
I have had to redo my entire MP store due to someone flagging my items. In doing that, I have had to alter my in-world store (which has been taking days to modify demo-rezzers etc.) as well to reflect these changes. As my homes feature adult animations I now have had to redo and repackage each home with a (pg) version bed so that the homes remain available to all consumers. I understand that it was my oversight when initially setting up the items and I should have done this from the beginning- but the pictures don't display anything explicit and it seems a bit far fetched to have to list homes under the same category as genital enhancements.
I also know that veteran competitors, whose products already monopolize the majority of our list section, have been listing and still do list homes with adult beds, under the mature/general categories. They have for years. I'm not speaking poorly on behalf of competitors, after all, there are enough people in SL that every merchant should be able to share a bit of the population but what is fair for one should be fair and enforced for all. They need an upgraded system with more categories - and if someone should be flagging items, it should be someone in relation to LL vs. disgruntal consumers or competitors or alts thereof.
-Ev