Not sure what you mean by hard-coded penalty but there are two classes of sites (called lightweight and midweight) whose submissions get penalized by default because of too many lightweight stories in the past. Not necessarily bad content, just content that doesn't fit the HN guidelines. Reddit's great of course—it's just that sometimes (well, usually maybe) HN isn't the best vessel for its greatness.

Most major media websites are in one of these categories. Moderators take the penalties off when we see a solid submission, and there are other ways that the software interprets community input to mean that an article might be better than usual and lifts the penalty.

We were nervous about making heavier use of this technique, but there were so many complaints about fluff articles making the front page that we had to do something, and banning major sites that sometimes produce excellent-for-HN articles wasn't an option. By now the current approach has been in place for a couple of years and it has worked out pretty well. Those complaints will never go away but they're at a more manageable level.