The Merle Gene dilutes random sections of hair to a lighter color which leaves Patches of the original color, sometimes these patches can be very small. If you start with a black dog and add the Merle Gene, you still have a black dog genetically, but with sections of the black diluted. Unlike the piebald pattern, these patches or sections may look jagged on the outer edges. Merle affects only the Eumelanin, and does not affect the Phaeomelanin (red/fawn) which will appear normal. This means you can have a merle dog and not see it visually. Merle affects only black based coat color. Eyes, and noses can also be merled.
Black Merle dogs are often called Blue Merle because the Merle gene dilutes patches of black to a grey color. Blue Merle on genetically Black Merle dogs is a widely used term, but is not correct. They should be called Black Merle, their nose, footpad, and eyeliner pigment is still black. If these dogs did not have the merle gene, they would be solid black. The term Blue merle, when used on black dogs is misleading because blue dogs should have the [dd] gene if they were truly blue. A black merle dog will never have the double [dd] gene, but the True Blue Merle dog would always be [dd]. It is the patches on the dog that will visually define the dogs color and what it should be appropriately called. This can be backed up with DNA testing. Thus in the True Blue Merle dog, the patches that are left would be True Blue and the sections that are diluted would be a much lighter color blue. This is the case in all the Rare Colors. The sections left on the lilac Merle dog are almost white, it is so light. Makes since when you think about it. There are 3 dilution genes at work in a Lilac Merle dog. Some of these colors will blend in with the diluted color so much, that DNA Color Testing may need to be done to be sure of the true color.
The Merle gene when doubled up, can, but not always does, cause health issues, mostly deafness and blindness. For this reason, two merles should not be bred together, as this could result in double Merle puppies with possible problems. These problems are virtually eliminated in single Merle gene dogs and the percentage of incidence is the same as in any breed, color, or pattern. Double Merle can be problematic because it can cause lack of pigment in certain vital areas, such as the eyes and inner ears. Single merle dogs have plenty of pigment because they still have a non-merle allel to make pigment. Double Merles often have large areas of white where there is no pigment produced.
In the hierarchy of genes, the Merle Gene overrides the Dominant Black(SEAL) gene, the Seal gene overrides the black and tan gene, so you can have a Black and Tan, Black Seal, Black Merle dog and would mainly see only the merle, but muted. It is very important to know the TRUE DNA of your dog if you plan to breed.