It is not shady at all! I am assuming it is only mask, fins, snorkel, weight belt and weights and they provide use of BCD, tank and regulator?
Of course, I don't agree if they are trying to force certain brands on you. Our LDS requests you to buy basic snorkeling gear and provide use of everything else straight through certification and checkout. If you don't buy basic snorkeling gear, you have to rent the BCD, regulator, etc. I understand they have to make money somewhere.
How do you expect dive shops to stay in business if you don't buy gear from them?
A dive facility makes very little, if anything, from teaching students. Most of the fees go to the Instructor, pool fees, insurance, etc.
EVERYONE SHOULD SUPPORT THEIR LDS! Without them, you would have to send gear off to be serviced, etc. ... don't get me started ....