This type of bulling is called Relational Aggression. Relational aggression encompasses behaviors that harm others by damaging, threatening to damage, or manipulating one's relationships with his/her peers, or by injuring one's feelings of social acceptance (the Ophelia Project).
The most important thing to do is strengthen your daughter’s self-confidence by putting her in situations that accentuate her talents and strengths. Providing your daughter with concrete ways to deal with the bullying is more important than confronting your friend or her daughter. Attempts at changing another’s behavior (friend or no friend) are unlikely to be successful. Focus on your daughter and what she can do to end her victimization.
What you can do?
• Don’t dismiss your daughter's stories as "drama", her perception is her reality. Actively listen to her thoughts, feelings, and concerns.
• If the relational aggression is not stopping, a quick tip is W T T: Walk away from the situation, Talk to someone and process, and Tell someone who can do something about it. Failure to report repeated relational aggression can lead to depression and other mental health problems.
• Practice (or role play) specific phrases/words she can use in specific situations to stand up to the bully
• If your child is lacking certain social skills or has difficulty reading subtle social clues, it is important that you give your child concrete, specific advice on peer interactions. Inviting friends over to your home affords you the opportunity to watch your daughter’s social interactions and provide supportive suggestions after her friend leaves.