I don't think Microsoft viewed Mono as a competitor. Even before Microsoft acquired Xamarin for hundreds of millions of dollars, they already had a history of collaboration on .NET, including sharing test cases in order to help with compatibility, and co-developing integrations into Microsoft products such as Azure and Office 365.

The "keeping [developers] from developing products that can actually compete" assertion is frankly absurd. .NET's real competitor is and has always been Java. Java, possibly the world's most-used platform that isn't JavaScript, has always had heaps more people working on it than .NET's entire ecosystem, let alone just the Mono project.