Android Studio two flavors with different manifest files

I'm having issues with defining two different manifest files for my flavors in Android Studio. This is my current project structure:

The AndroidManifest.xml in the free flavor looks like this:

<?xml version="1.0" encoding="utf-8"?>
<manifest xmlns:android="http://schemas.android.com/apk/res/android"
    package="se.example.package">
    <uses-permission android:name="android.permission.INTERNET" />
    <uses-permission android:name="android.permission.ACCESS_NETWORK_STATE" />
    <uses-permission android:name="android.permission.ACCESS_WIFI_STATE" />
</manifest>

The AndroidManifest.xml in the main flavor has no uses-permissions, but contains the rest of the manifest code that is shared between all flavors.

The AndroidManifest.xml in the pro flavor looks like this:

<?xml version="1.0" encoding="utf-8"?>
<manifest xmlns:android="http://schemas.android.com/apk/res/android"
    package="se.example.package">
    <uses-permission android:name="com.android.vending.CHECK_LICENSE" />
</manifest>

build.gradle defines the two flavors like

productFlavors {
    free {
        applicationId 'se.example.package.free'
        minSdkVersion 14
        targetSdkVersion 21
        versionCode 1
        versionName '1.0'
    }
    pro {
        minSdkVersion 14
        applicationId 'se.example.package.pro'
        targetSdkVersion 21
        versionCode 2
        versionName '1.1'
    }
}

The result that I am expecting is that the different flavors defines different uses-permissions. This is not the case. The result is currently that the both flavors only defines the <uses-permission android:name="com.android.vending.CHECK_LICENSE" /> as defined in AndroidManifest.xml in the pro flavor.

I have tried:

• Clean project
• Rebuild project
• Restart Android Studio
• Sync gradle

But without success. How am I to fix this? Any help is appreciated.

EDIT 1

I changed the location of each flavors AndroidManifest.xml file from each of the res folders to free and pro folder. The result of this:

1. Pro flavor shows Licence permission as expected.
2. Free flavor shows permissions from both AndroidManifest.xml files, License and network permissions (Should be only network)

This feels like an issue of project structure. What to make of this?

EDIT 2

I pulled the merge reports as Commonsware hinted, these are the reports regarding uses-permissions

Free:

uses-permission#com.android.vending.CHECK_LICENSE
ADDED from qwknoteGIT:licencing-library:unspecified:26:5
    android:name
        ADDED from qwknoteGIT:licencing-library:unspecified:26:22

Pro:

uses-permission#com.android.vending.CHECK_LICENSE
MERGED from qwknoteGIT:licencing-library:unspecified:26:5