There is a lot to be said for letting children sort out this sort of thing, but the final call needs to come down to you as a parent - do you think your child was getting upset by it, or treating it as banter.
If it upset my child I would have called it out then and there - the same way I would if it were my own children making fun of another, pointing out to them that it wasn't a nice thing to do.
Then the parents would either back you up, or have to take an opposing standpoint. I can't think of any of my children's friend's parents doing this, more likely would be they either weren't paying attention or just leaving it up to the kids to sort out.