Similar work in same issue I wrote a tool to perform X. It was rejected by a journal as not novel. I wrote to the editor saying there is currently no tool to do X. They acknowledged this.

When the issue I was rejected from came out, it contained another tool which did X. I have not tried to republish my paper, but it is on the internet and has been posted to forums.

A) Should the editor have mentioned in my rejection that they were just about to publish a similar paper? This may have changed what I did (ie publish elsewhere)

The other paper said "there is currently no tool to do X". The author almost certainly didn't know about my tool/site.

B) Should the editor have suggested the paper cite my tool/website? Or at least not allowed the authors to say "there is no tool to do X"?

C) What should I do? Just give up on my paper?
Providing a novel tool is not necessarily novel per se and even with a novel tool you still might not qualify for the editorial line of the journal. But I can't say really with this information only


A - Usually reviewers do not have even knowledge of all the papers in a journal or conference. That means that if they rejected you for that, it's that the same reviewer reviewed both papers. Moreover, they should not have any ground to favor one tool over the other, since they are both unaware of the other, and they are both new. It usually is a good thing when 2 tools come out at the same time in the same journal, because it usually leads to a comparison paper :p
B - Other tool couldn't cite you since your paper was rejected. Maybe given them the website, but that's a gray area i think. 
C - As a rule of thumb i don't give up on a paper I think it is interesting. If your tool is better than the other, then compare it in a paper (maybe conference rather than journal). If your tool is worse and you want to improve it, do so and be better, then compare it. If you don't really care, and only have a bruised ego from the rejection (yes, i know, it hurts...), you can give it up. But I still would say, don't, because there is always room for improvement.