I have seen it lots of times, and I can recall once when I was young and n00by being bullied by a group of older players
I was on a blue winged wolf character that I had just made, and I was very proud of the look. So I go walking along the outer "beaches" of Atlantis, sat down somewhere, and then three of four winged wolves came up to me. They were immediately all very rude to me, saying that I was a n00b and making fun of my character. They said they "owned" the area that I was in (being so young at the time I didn't know how to give the proper "this is a public map and blah blah blah" speech, and just trying to run me out.
After a while I decided to stick up for myself and gave them a pretty good comeback (if I do say so myself), and they were all like "I'm gonna report you for that, I just got a screenie!", even though I said nothing against the rules or anything.
And of course, I believed them in what they were saying about me getting in trouble, so I left. It still pains me to this day of how I could have handled the situation >.>
Here's another thing that I witnessed/somewhat experienced about a week ago; I was sitting in Ficho, just silently listening to everyone, when all the sudden a neon green dragon character comes rolling in, asking if anyone wanted to be their mate. This one person responds with something like "oh sure I have a dragon character that could become mates with your character"
Neon dragon (after not hearing the person the first time): "anyone wanna be my mate?"
Other person: "oh I guess I could"
Other person: (I assume they finally F3ed the neon dragon, because then they responded with something like this;)
Other person: "oh wait, never mind. Your character is ugly and dragons shouldn't ever be colored like that"
So I politely whispered that person, explaining to them that everyone in the game has the freedom to create their characters however they wish and that there is no "right" or "wrong" way to create a character. They ended up sending me rude whispers (nothing rude enough for me to grab a screenshot though) and it ended with them blocking me
But yeah, I agree; it's sad to see younger players get bullied by the older ones