Actually, most of what gets passed around about 'dominance' and pecking order for dogs is way off the mark -- decades out of date and based on what are now seen by animal behaviourists as very poorly interpreted captive wolf behaviour that bears little resemblance to actual canine social structure. So start by setting that aside as it may wrongly influence what you think you are seeing and what you should do!
For example a puppy this small is simply NOT showing anything much to do with dominance or a pecking order -- nor is your older dog. In fact, they are both young puppies still and Charlie will not even be remotely interested in establishing any kind of real pecking order over a tiny puppy -- they both know the pup is the pipsqueak here! Max is only playing -- doing exactly what puppies do, in the way they do it (meaning he is being a bit of a nippy pest! Which is just what Charlie would have been himself at this age, with other dogs).
This is normal play behaviour and though it can look rough, it almost definitely isn't. I'd just let them at it unless Max is being so incredibly annoying that Charlie might want to get away -- in which case, a puppy xpen that you can pop him into to give Charlie an occsional break would be a very good investment (it is a good investment anyway, with two puppies/dogs to manage!). Older dogs will discipline a puppy when it steps out of line and this should be allowed unless there is a serious problem but these two sound like they get along fine. Dogs look like they nip in play but 99% of it is mouthing and play bitingand growling. It is also better to let Charlie take the role of deciding if he has had enough because his guidance to a puppy is actually more valuable that what we as humans do. He wil give Max the message if he needs one! :lol: It is important for Charlie to structure the way he wants to interact with Max and set his own boundaries with him. As he is only 7 months himself he is going to still be acting like a puppy himself, BTW.
I'd suggest reading some of Dr Ian Dunbar's training books for guidance on managing puppies, especially as you have two at once -- that is a serious handful that is only going to get to be a bigger handful! he has a couple of very good puppy books.
For a fun and fascinating read on the complexities and regular misinterpretation of dominence, try Patricia McConnell's The Other End of the Leash
http://www.dogwise.com/itemdetails.cfm?ID=DTB745 and especially Jean Donaldson's Culture Clash:
http://www.dogwise.com/ItemDetails.cfm?ID=DTB464.
Littermate syndrome is when two pups even if not from the same litter start to bond more closely with each other than with you. There's some guidance in the Library section on how to manage two puppies at once, to prevent this happening. This can be a serious challenge and requires separate training and equal and separate time given to each puppy, every day.