Is it normal for exchanges to use in-house bots to compete with and drive away market makers?

Hi, I am curious if it is common practice(also whether its even legal/ethical) for a crypto exchange to run its own bots within its markets.

The bots in question will compete with other market makers, often driving down the margin to nullify any possible front-of-book profits to be had by other people within the market due to the fees(market makers paying fees, in house bots not paying fees while simultaneously collecting a fee from the other side of the trade). These bots naturally also do not abide by the rate limit restrictions for other API users, and when you buy from/sell to them if they are broken, the tech lead in the company reprimands you and threatens to ban your account.

Any of this legal? Is this just all business as normal?

Is this normal? Or even allowed?