UserAgent: Mozilla/5.0 (X11; Linux x86_64) AppleWebKit/537.36 (KHTML, like Gecko) Chrome/58.0.3029.81 Safari/537.36

Steps to reproduce the problem:
1. Extension A sets the proxy
> var config = {
  mode: "pac_script",
  pacScript: {
    data: "function FindProxyForURL(url, host) {\n" +
          "  if (host == 'foobar.com')\n" +
          "    return 'PROXY blackhole:80';\n" +
          "  return 'DIRECT';\n" +
          "}"
  }
};
> chrome.proxy.settings.set(
    {value: config, scope: 'regular'},
    function() {});

2. Extension B observes that change and tries to set it's own proxy:
> var config = {
  mode: "pac_script",
  pacScript: {
     "url":"https://my.corp.com/proxy.pac"
  }
};
> chrome.proxy.settings.set(
    {value: config, scope: 'regular'},
    function() {});

3. The resulting state is the one set after #1.
> chrome.proxy.settings.get(
  {'incognito': false},
  function(config) {console.log(JSON.stringify(config));});

# {"levelOfControl":"controlled_by_other_extensions","value":{"mode":"pac_script","pacScript":{"data":"function FindProxyForURL(url, host) {\n  if (host == 'foobar.com')\n    return 'PROXY blackhole:80';\n  return 'DIRECT';\n}","mandatory":false}}}

What is the expected behavior?
The proxy setting made by Extension B in #2 is in effect.

What went wrong?
The proxy setting made by Extension A in #1 persists.

Did this work before? N/A 

Does this work in other browsers? N/A

Chrome version: 58.0.3029.81  Channel: stable
OS Version: 
Flash Version: 

This was discovered while investigating  http://crbug.com/709264 . One of the solutions discussed was to have an extension that observes proxy setting changes and overwrites them. While testing out this solution, we've noticed that overwriting proxy settings didn't play out as expected.