You need to decide how much it bothers you. Odds are the parents will not come to see your point here. So if you can choose to continue as per the parents wish or just give an end date to formula. Please tell me it isn't in a bottle? If it is in a bottle then maybe that is your starting point. You'll continue to give the formula but only in a cup (not a sippy cup - either open top or straw cup). Set a time limit (he gets 5min to drink after meals then it gets put away).
What a disservice to the child. Toddlers are picky by nature...having them come to the table with a full belly just sets them up to never NEED to try anything. We know that children learn to eat new foods through exposure and trying. This won't happen if the child is full.
Unfortunately the odds are the parents likely won't change because you want them too. At best they will accept that you won't serve it anymore and they will increase the formula on their end to compensate.
Best of luck!!