I think many factory farms are switching to a vegetarian diet not only so that they can market the chicken and eggs as vegetarian fed, but because they can then sell the "chicken litter" as cattle feed again since it would not contain animal protein from the feed.
I find it encouraging that consumers are now questioning,where their food is coming from, what it is fed, and under what conditions it is raised.
As long as the vegetarian diet fed to chickens is meeting their nutritional needs I don't see a problem with it. Same as for vegetarian humans. It is a lifestyle choice.
Backyard chickens will always be healthier and happier than factory raised ones. I personally try to feed mine as "natural" a diet as possible. That includes allowing them to forage on bugs, worms, and other animal proteins in the yard. I don't feel right feeding them chicken or other meat as a staple in their diet (although they may get little bits in leftover rice or pasta.) No legitimate rationale for this it just doesn't seem right to me. I have even seen the chickens fighting over dead rabbit parts in the yard - so I know they do eat meat if left to their own devices - lol! They are opportunists.