I would suggest that next time it starts to escalate into a situation when your LO will probably bite, then turn to your 'friend' and say something along the lines of 'geez, your baby is so aggressive. No wonder my baby bites, she is probably afraid of being hurt."

Acknowledge your baby bites but let her know that there is a reason. Hopefully she will do something, even something simple like removing her baby from the situation until her baby calms down and they can play happily again.