I'm surprised Interscope was ok with this

It's because this is the way it's done in the real major-label music business. So probably they didn't realize how abhorrent it would be to regular people who buy into all the glitz and glamour that the entertainment industry sells. Record labels and managers never just celebrate somebody's talent as-is (if that were the case Lizzy Borden would be a megastar), they meddle and take control and do everything they can to make the act into a commercially viable product at every level. John Kalodner is an example of somebody who did this with bands like Whitesnake. Very sad but that's the way the music business works. Miley Cyrus is another major example where even the public saw in real time how the A&R and management people were taking control and molding her to create controversy and sell more records and concert tickets. Taylor Swift is yet another example whose own career trajectory kinda aligns with that of Lady Gaga's character.

Interscope was also the first (and I guess last because I've never heard of this since) record company to openly pay radio stations to play songs when they paid a Portland, Oregon station to play Limp Bizkit's first single in the late 90s. They paid for 50 airings of the song and each airing was preceded by a brief disclaimer that the song was "brought to you by" Interscope Records. Of course that was not the first ever "payola" as that's how the radio/singles market works by and large but it was the first time a major label openly flaunted it.

The Rez character is incredibly horrible! He all but abuses Ally, harassing her into ditching who she really is and becoming this random pop star. Then, he destroys Ally's husband. Add to that, there are no consequences for him.

It is interesting that Interscope would be okay with it. But, the entertainment business being the way it is, they could have been oblivious, and it could have gone right over their heads.