Yeah, it is. Fat people aren't a protected group, like gays, so they aren't banning hate speech, in the sense of the law (which they have to do, or be liable) they are just banning "people we don't like" because the advertiser don't want to be associated with those people.

It's bad because you can always become the "people we don't like", especially when it's corporation driven.
Do you prefer Apple or Samsung? Too bad, the other wants to advertise, pointing out their flaw is not "not allowed".
Are you toting the party line we want to push? Too bad, see you around.
Is your open source app competing with one of the advertiser? Oh, sorry, I have no idea why you had problems with your sub for the two weeks they were advertising.

Sure, they're allowed to do this, but that doesn't mean that people have to support it.
Lots of people put lots of their time here building communities. If you just try to push them out and take over, you'll get backlash. You're entitled to do what you want, that doesn't mean you're free from "consequences" (aka, people turning everything to shit. (If it's the people driven, then it's people driven, no matter if they want to drive it to a good place, or to a shit hole)).

I, personally, sit somewhere between the ideological "if you don't support that people are allowed to not have the same opinion than you, then soon enough, your own opinion is going to be muffled" and the practical "reddit found out they had a bucket of shit on their hand, and they decided to get rid of just the bucket, now shit is everywhere".
So I sit back and enjoy the popcorn.

Why didn't they outright just ban everyone who has been in those sub, upvoted something there, and or commented there, if they wanted to get rid of those users? It's as if they wanted to ban users, but didn't want people to fear getting banned. (In reality, it's because they want both to please the advertiser AND not lose their product, the users.)

They are just making a series of bad decisions, IMO, by being milquetoast.