According to the documentation, the merge feature is only supported for account, contact, lead, and incident entities. Here are the relevant links for your reference:

• https://learn.microsoft.com/en-us/power-apps/developer/data-platform/webapi/merge-entity-using-web-api?view=dataverse-latest

Obviously, if the system can run duplicate detection on custom/OOB entity records, it should be able to merge them.