While it may grate on your nerves, it's the grandparent's job to spoil their grandchildren. Be grateful your son has a doting grandpa! You can enforce your rules when he's home w/ you. Trust me, he'll still turn out ok.
I had the same thing happen while I lived with my parents, do you live with him? I tried to talk to my parents about it, they flat out told me they'll do what they want in their home; they are the grandparents and that's what grandparents do. I moved out, that's the only thing that solved the problem.