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I read earlier today in one of the dev's Q&As that there isn't friendly fire nor a toggle for it. They actually have a function that does the opposite if you play the healing spec for the soldier class where you heal people with your bullets.
Why can't a heterosexual guy tell a heterosexual guy that he thinks his booty is fly? SSBB FC: 4811-6636-8224
You're just in the world of Borderlands taking missions, and let's say you and I are in a game together and we want to fight against each other. Well, at any time you can walk up to me and you can do a melee attack. Slap me in the face, and it'll say “You demand satisfaction.” If I decide to melee you back, I'm saying I accept your challenge. No matter where we are in the world, a dome will cover us and we'll begin a duel - a dogfight if you will – and we'll see who's the best. Anywhere you are in the world, you can start to throw down and beat on your friends and see if you're better than them. Also, in this world, there are arenas kinda like the Thunderdome in Mad Max. Near each settlement there's an arena, and you can go into the arena with your friends and you can actually set up more of an organised game, like a deathmatch game or a team deathmatch game, and the arena inside is designed for competitive combat.
that's taken straight from the article.
PSN account: n00b_on_fire_44 R.I.P : my 20gig launch PS3 11/16/06-6/28/09.long live my new 80gig 07/14/09-???