The competition would not be settled at a simple battle, the cultivation world has a unique sense of designing competitions, Since the level of one's cultivation is not all that becomes the judge of their strength. There are many other factors including; Team work skills, decision making skills, fighting skills etc.
The competition organized by the Bai clan was designed as such too, all the participants were called in a meeting 3 weeks prior to the start of the competition, and were explained about the rules.