This could be an allergic reaction. If the area is dry and flaky, you can put Neosporin cream on it. The reasons for some allergies could be food or if you did just get a new puppy, possibly fleas. It is possible for your doggie to be allergic to flea bites. Make sure you treat both of your dogs with a liquid treatment such as Frontline. If it is a different type of allergy (ie. food)try a new food with less corn in it. I know this is hard to do, but sometimes dogs develop a corn allergy after eating certain foods for a period of time. Hope some of this helps, good luck.

Onzanzabarsands has given some good ideas to consider in this matter. I would say, take both dogs to the Vet to start, since you need to have the new puppy seen anyway, and the Vet can do a simple skin scraping to be sure there is not a problem that COULD spread to you or the puppy. Keep in mind that all creatures, including humans harbor MITES on their bodies. There are, however different types of mites, some beneficial..they eat dead skin, and some that cause disease and are NOT welcome guests at all. Allergies well could be the problem here, as suggested. While some dogs can do perfectly fine with foods that contain corn, an overwhelming number DO NOT do well. Nutro is one brand of dog food that is fairly reasonable in price, and while it does have byproducts in it, it is fairly high in meats and doesn't contain corn. Human grade dog foods are usually very good and digestable, they are, however generally pricey. I do not recommend Iams, or Euca....(neither one of these is HUMAN GRADE) although both are frequently sitting in many Vet's offices. The cost simply doesn't justify the content to me. Blue Buffalo is a good brand, but not all dogs are wowed by the taste. Nature's Variety/PRAIRIE is a wonderful brand and both my dogs and cats were thrilled with the samples they received. I have one elderly cat on their dry feed and a high meat diet for the past year. (this cleared up this cat's continuous problems with Hot Spots that he had experienced on-going since age 1 to 12...not a hot spot in over a year! It also stopped a puking problem he had developed!) As for Frontline or any other poison, I strongly attempt to discourage the use of such products. Too many dogs have come up with negative reactions to these toxic substances for my comfort zone. Cancer, seizers, skin allergies, behavioral emotional problems and assorted tumors..both cancerous and non...have shown up in puppies and dogs treated with these types of products. I do recommend NEEMS OIL and NEEMS soap, which you can either google and order on line, or look for at your local Health food store, or request that your local Health Food store order it. I buy mine at Fresh Foods in PA. Neems is NOT toxic or poisonous, but it does keep fleas and skitters off of both humans and animals without adding poison to the mix! My Pregnant neighbor was able to use it successfully this past summer to keep the biters at bay. Neems will not poison your dog, you or your children! Your Vet may suggest Allergy Tests to determine what is causing the problem. Tough decision because they can be expensive, and just like allergy tests for humans THE TESTS ARE NOT ALWAYS COMPLETELY ACCURATE. You can research feeding your dog a more natural homemade diet as well. Rice and cooked meats with some veggies may work for you or not...the more you learn, the more you can make an informed decision as to what you can afford to do, in terms of both your time and your available funds!