Maybe the best thing to do would have been to just let your dog go. Dog's have an instict to not kill each other- just to establish dominance. By holding on to your dog's collar, you may have interfered with his ability to communicate via body language, and also removed his ability to maneuver. I wasn't there though, so I can't say for sure. Dog's almost always work it out without hurting each other. By holding on to your dog, you removed "escape" as an option, and so "aggression" was the only option left- so it probably took on an aggressive stance, that the other dog read and went into attack mode.

There are, of course, poorly socialized dogs out there that don't communicate properly, and can be quite dangerous. And the sad thing is, it's usually not safe anymore to give them the socialization they need to be able to learn proper doggy etiquette. But even then I think the best thing is to let your dog take care of itself as much as possible.