Yes, before we jump all over this guy, there may be some valid reasons for the parents wanting to have the extended family live with them, such as more time with the grandkids + having family there to look after them as they become older/ in poorer health. Also, some families do still believe in living in an extended family group. While it is perceived as generous for the parents to be sharing their home with the family of 11, there are likely other dimensions to it. It’s pretty flip to say “You don’t like it? Move!” when there may be a lot of reasons - economic, personal, involving the grandparents’ own welfare, etc. - why this is not possible or desirable in this situation where the daughter and son-in-law aren’t exactly millennials camping out in the basement.
I also think “my house, my rules” only goes so far when you have multiple generations living together for any reason. Obviously it would not be okay if the grandparents encouraged the kids to disobey their parents’ authority on the basis of “grandparents’ house, grandparents’ rules”. Obviously if the house is divided in half then the grandparents can have guests, etc. in “their half” and the son-in-law cannot police this activity, but son-in-law (and daughter) still have the authority over their own children.