Our gym doesn't compete L1 and 2, but having observed now the progression (and exit) of different girls over the past year+ through our pre-team levels (equivalent of L1-3), it has become clear to me that there are certain girls who (if we had competed L1-2) would have been amazing and medalled all the time. They had that natural form, grace, and ability to get those early skills (pretty handstand-forward roll, straight leg cartwheel, tight body, pointed toes on leaps...) that would have swept the medal stands at those levels. However, a fair number of those girls have now sadly quit, or are struggling, at L3-4 because the next level of skills was just not attainable for them. Several moved to Xcel, and some quit after trying to keep up in L3 training, but simply were falling too far behind.
Watching this happen to real girls whom I thought would have continued to be the top of the class(!) has made me be more understanding of some girls repeating these low levels despite high scores. If we actually did compete L1-2, there would definitely be those "38" girls repeating - and in our gym, they would be the ones that just have not had the FHC or BHS click yet, despite months and months of faithful attempts. I have watched my DD and others in her group (who would have scored mid-pack at L1-2 for less pretty form) zoom past these girls in skills now training L4. I'm happy for DD, but do feel very sad for these girls who have been her friends. It's hard to watch them struggle while friends ascend. I know it's part of the sport, though, and you never know when your own DD will reach a tough impasse.
I'm sure there are sandbagging gyms, as well as other scenarios mentioned above that hold girls back despite progressing well in uptraining, but I now include the possibility when I see this that some of these girls really could not do well, and might even quit, if they had to compete the next level up. L1-L2 really is their 'peak'.