I don't see any problem with this. The English Rules say:
Merchants must be placed orthogonal adjacent to a merchant already present on the board. Newly placed merchants are always adjacent to one merchant at the beginning or the end of the market street and may never be adjacent to two merchants.
I think that the intention is that a merchant should not be orthogonal adjacent to two merchants. I believe this is for practical reasons (i.e. so it is clear which merchant is at the beginning and end of a merchant train at any point).m
For example, merchants might be placed in the order shown below. The red spaces would not be legal for a new merchant. The green spaces are legal for the next placement.