Or am I missing something?

Absolute strength for one, Absolute intelligence for another. If one AI has superior intelligence and compromises against one that asserts its will, it might be able to fool the assertive AI into believing it got what it wanted when it actually compromised. Alternatively, two equally intelligent AIs might present themselves to each other as though both are on equal strength, but one could easily be hiding a larger military force whose presence it doesn't want to affect the interaction (if it plans to compromise and is curious to know whether the other one will as well)

Both of those scenarios result in C out-competing D.