Arsene Wenger has blasted referee Neil Swarbrick and his decision to award Watford a controversial penalty in Saturday's teatime clash.
The Gunners were 1-0 up courtesy of a rare goal from Per Mertesacker, and arguably should have doubled their lead after conjuring up a number of good chances in the second half.
Troy Deeney levelled the scores via a successful penalty kick after Swarbrick had adjudged Hector Bellerin of fouling Richarlison - replays afterwards suggested that the Brazilian star went down very easily.
In the eyes of Wenger, it was a 'scandalous' decision that cost his side the chance of points at Vicarage Road. He said, as quoted by Sky Sports: "I believe that we had many, many dangerous situations where we could have scored but didn't. We had opportunities to score the second goal.
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"The decision on the penalty is a bit ridiculous and then we panicked a bit for their second goal and in the end we stand with a defeat.
"It is a scandalous decision, but what can we do about it? Nothing. We can talk and talk and talk. At the end of the day they scored.
"We dropped our level in the second half, we played very well in the first half. Despite that, we had the chances to score two and three."
Arsenal lie sixth after the damaging defeat, which allowed the Hornets to leapfrog their opponents in the league table.