Heterostructures composed of atomic layer materials (ALMs) bonded through van der Waals (vdW) interactions have demonstrated great potential for use in next generation optoelectronic devices. However, the role of strong charge carrier interactions in the interlayer photocurrent in such devices is not fully understood. One such ALM, molybdenum ditelluride (MoTe₂), has a band gap energy near 1.0 eV, suggesting that MoTe₂ is a promising material for ultrasensitive infrared optical photodetectors and next-generation solar photocells. Like other ALMs, the photoresponse in MoTe₂ should give experimental access to strong many-body phenomena. Here, we report on the advanced fabrication and dynamic photoresponse of graphene-MoTe₂-graphene vdW heterostructure photocells. We find that the power dependence of the interlayer photocurrent is well described by a single power law at low power, where the power law exponent parameterizes the nonlinearity of the photoresponse. We develop a detailed 2-particle Auger recombination model that accounts for careful time integration of the dynamics, resulting in an analytic solution that reproduces the non-linear powerphotoresponse. We develop a detailed 2-particle Auger recombination model that accounts for careful time integration of the dynamics, resulting in an analytic solution that reproduces the non-linear power dependence. Additionally, we observed sharp suppression of conventional power law behavior above a critical power threshold, accompanied with a critical phase transition in the spatial expansion of the suppressed photocurrent region. We attribute this transition to the emergence of an electron-hole liquid phase that is remarkably stable at room temperature and moderate operating conditions. Additional measurements of the dynamic photoresponse support the existence of this phase, allowing us to fully explore the evolution of electron-hole pairs with increasing density in MoTe₂.