In the lobby, load up the Arena menu with
or walk with your chibi character towards the middle of the platform, north from where you start.
Walk up to the guy with the purple hat on the right side of the red sign and click
. Then, select the second option "Observe" and hit
. You might have to wait a while until the next Arena battle starts. You'll see a little orange magnifying glass in the lower right corner while you are placed on the Arena spectator stand. When a match is found, a new window will come up. Just wait until the battle starts, no need to accept anything.
The achievement will be yours once the match ends.
*** This may take a while - just fire up a TV show or find something else to do while searching; for me it popped after about twenty minutes ***