How does this work?

I am new to this and can't find these questions answered, but if they were, I apologize.
How are characters matched up in the arena? By level? I am a brand new level 1 and am getting matched up against guys that are borderline level 2, and am getting absolutely destroyed. Sometimes not even pulling a hit off. That doesn't seem that fair. Should I purposely not level my guys up past 0 and hord more experience until I can become a mid-level 1 guy? Any pointers would help.
How are characters matched up in the arena? By level? I am a brand new level 1 and am getting matched up against guys that are borderline level 2, and am getting absolutely destroyed. Sometimes not even pulling a hit off. That doesn't seem that fair. Should I purposely not level my guys up past 0 and hord more experience until I can become a mid-level 1 guy? Any pointers would help.