What are the limits to the Merovingian's power?

Question

The Merovingian is a special character in the Μatrix similar to the Sentinels (Agents) but different in certain respects. The greatness of the Merovingian is that he has what I come to understand as blue pill abilities(that is he can alter reality within the matrix), like what he does to the woman in Reloaded when Neo, Morpheus & Trinity meet him for the first time.

But we know that the Agents, although special & powerful are bound by the rules of the matrix which makes them weak as extrapolated by Morpheus. Does the Merovingian have similar weaknesses within the matrix?

Note: In reloaded when Neo fights his minions in his mansion, after Persephone betrays him and defeats them, the Mergovingian runs away instead of facing Neo. Although this is not very conclusive it does point towards a sense of fear on the part of the Merovingian towards The One (which may indicate weaknesses & the possibility that he is not all powerful)

Answer 1

The Merovingian is an extremely old program. The Oracle described him as being "one of the oldest of us".

According to the Wikia for The Merovingian he is said to have a connection with the second failed matrix.

A connection between the Merovingian and the second failed Matrix may exist. The Merovingian surrounded himself with henchmen with remarkable abilities that other programs do not show. The Oracle, Persephone, and the Architect alluded to these programs in various conversations involving Neo. These programs inhabited the ill-fated second Matrix in an effort by the Architect to establish a primitive level of choice through frightening the human populace. When the second Matrix failed, the Merovingian kept many of these old programs for his own devices.

Now as far as his powers it's because he is skilled in rewriting code, his original role prior to exile was to act as the Operating System.

It has been confirmed that the Merovingian's prior purpose to exile was the Operating System (like Microsoft Windows or Mac OS X) for an earlier version of the Matrix, the second of the two Matrix betas. Thus the Merovingian's original role was a leadership position, coordinating activity and information in the Matrix beta. He would later make good use of these skills in exile as a power broker and trafficker of information. It also explains why the Merovingian is so skilled at rewriting Matrix code to create new custom objects.

As revealed in the Matrix Online: http://www.matrixresolutions.com/index.html?page=matrix_games_mxo_kids_blog

The particular quote that is from the Matrix Online is as follows from Theories of the General. (The blog was supposed to be an in character Matrix Online Character's blog that supplements and adds backstory information... It was written by Matrix Online Storywriter Paul Chadwick.)

Theories of the General (July 26, 2006) - The Kid presents a few theories about who the General is. He says he could be a misfit program who genuinely wants to help humans, or he could be a tool of the Machines. But he discredits both of these theories and leaves the question open. The Kid says something else that sheds quite a bit of light about the history of the Merovingian:

True, appearances do lie. There's no reason a sun-controlling program should look like a little girl. Or an operating system seem to be a sybaritic French gangster.

The first sentence refers to Sati of course, and the second sentence refers to the Merovingian. The second sentence confirms my theory that the Merovingian used to be the Prime Program for Matrix versions 0.8b and 0.9b (see Matrix System: Revision History).

http://www.matrixresolutions.com/index.html?page=matrix_system_revision_history

It's believed that he is similar to Neo but nowhere near his power. His limitation is that he can only subtly manipulate information and has no control over gross manipulation.

As the Merovingian's power lies more in subtle rather than gross manipulation of information, he may not be a previous One.

Answer 2

There is a misconception in your question. The Merovingian does not appear to have any abilities above those of other sentient programs in the Matrix such as the Architect or the Oracle. He does not have the ability to "break the rules" as Neo and the other rebels do. The situation with the cake and the woman at the restaurant was a part of a demonstration of his notions of "Cause and Effect". The piece of cake he had delivered to the woman had a subroutine code in it which caused her to experience an orgasm after one bite, forcing her to excuse herself from the table ("cause, and effect").

The Merovingian comes from a very early version of the Matrix, his original purpose was to regulate behavior amongst the "Bluepills" and report back with results. Once he became obsolete, but chose to remain in the Matrix mainframe rather than chose deletion, he became a sort of trafficer of information, power broker, as well as providing refuge and employ for other Exile programs, at a price. While incredibly shrewd and manipulative, he does not appear to have any combat ability, which is why he keeps other programs such as the Twins and his crew of henchmen around. The Merovingian's abilities seem to be limited to manipulations of certain base emotions in those still plugged in to the Matrix, no doubt left over from his previous role in the earlier beta of the Matrix.