Let her have him! I mean it...don't ever compete with your friend for a guy. Listen, the guy will know it, she will know it, and you will look like a desperate girl on a mission! And if you bow out and say to her, "Go for it," you look like the confident, well-adjusted grown up that you are.
And you know what? It just might work. What I mean is, you might actually get the guy! Still, don't let that be your motive. But I mean, when you take a step back, you are basically saying that you don't need to compete with anyone for a man. And your friend is saying that she would rather shove her pal under a bus and get the guy. Who looks like the shallow person now?
And honestly, the guy who picks your friend over you isn't the person you want to be in a relationship with now, is it? And the friend who chooses a man over you, isn't the type of person who will be there for you in a crunch will she?
So, you end up the winner all the way around. And next time, pick your friends better.