After months of negotiations, the players and CA have failed to reach agreement on a new pay deal, leaving 230 cricketers unemployed since the end of June when their contracts expired.
CA chief executive James Sutherland said last week that unless intensive negotiations over a revenue-sharing deal produced a compromise by early this week, his organisation would seek the intervention of an industrial umpire to resolve the impasse.
Clarke feared things would not be the same between the governing body and the players if and when the disagreement was finally resolved.
"I think it's been horrible for the game, to be honest," Clarke said told commercial broadcaster Channel Nine.
"There is no doubt what has happened will affect the relationship even more than it already was affected between players and Cricket Australia.
"The problem we have got now is that it is not just the Australian players that are affected", he added, saying the fans and the public were also involved in "the number one story in Australian sport".
Negotiations between the two warring parties continued over the weekend, with the key issue a new revenue model.
The players were paid from gross revenue for the past two decades, but CA now wants payments to come from a set pool, with players to share only in surplus revenue.
Clarke said he could understand the arguments of both parties but added: "Whatever has been going on, it should have been done in private."
The Test squad is due to go into camp on August 11 ahead of a Test tour of Bangladesh, which is in danger of being scrapped following the boycott of Australia A's tour to South Africa earlier this month.
The long-running dispute also threatens Australia's one-day tour to India in September and October ahead of the showpiece home Ashes series, beginning in November.
First Published: July 30, 2017, 4:26 PM IST