Instagram was not the "main game in town" when Facebook acquired them. It was one of many photo sharing/editing apps and had far less market penetration than it does today. Why should Facebook be punished for acquiring a promising app and turning it into what it is today by integrating it into its ecosystem?
Hindsight is 20/20 but at the time of acquisition it was far from a sure thing and it's safe to say that without Facebook resources Instagram would not be what it is today.
I remember when Instagram was acquired and it seemed like everybody was using them, they were getting mocked on the night TV and SNL, it certainly seems to me they had the primary mindshare and threat to the social media experience at the time.
Hindsight is 20/20 but at the time of acquisition it was far from a sure thing and it's safe to say that without Facebook resources Instagram would not be what it is today.