Steps to reproduce:

0. Setup perforce server
1. Open attached project
2. Enable VCS and submit project to server
3. Pull and open same project on another machine too
4. On first machine, drag GameObject prefab to hierarchy
5. Duplicate Cube object so now GameObject would have Cube and Cube (1) children
6. Move Cube (1) to different transform position and apply changes to prefab
7. Do steps 4 - 6 on second machine too
8. Back on first machine, submit changes to remote machine
9. Now on second machine, submit prefab changes too - notice merge conflict which is expected
10. Resolve conflict using semantic and merge tool option
11. On second machine, notice that now prefab hierarchy is:
GameObject
Cube
Cube <- this doesn't seem right, Cube (1) is expected
Cube (1)

Note, doing same steps on scene files instead of prefabs produces expected hierarchy layout:
GameObject
Cube
Cube (1)
Cube (1)

Reproduced with: 5.6.4p3, 2017.3.1p2, 2018.2.0a1