I have spoken to my other SIL and she is going to sit our niece down and talk to her about who she should be friends with and who she shouldn't. We have to be careful in what we say to her mother as she is always quick to punish her without listening to the details.

But if it isnt rectified in a matter that i am happy with, like my niece has a go at us then i will let her parents know. I hate to be the party pooper but when it comes to internet safety i take it VERY seriously.