People houseruling among friends is fine, but ik a tournament with strangers is wild. I'm not completely up to date with the rules, but if I'm not mistaken you're right in both cases. And especially the first point you made is just baffling that they'd play it like that. That completely negates any possible negative effect. Even as a houserule, that makes no sense at all. I don't know off the top of my head, but are there any hero models that perhaps allow them to do this?
Have you talked to them about it? If you told them about it and they still don't change the way they play, that would be a moment where I'd politely go "Alright guys, this isn't for me, but have fun, and I'll find another player!". There's nothing wrong with disagreeing with someone's way of playing and backing out because of it.
