Energy firms British Gas, Eon and Scottish Power have lost a legal challenge over the sale of collapsed supplier Bulb to rival Octopus Energy.

Bulb, which had about 1.6m customers, was the largest of more than 30 energy firms that went under in 2021 after a sharp rise in wholesale gas prices.

The government handled Bulb’s sale to Octopus after the failed company was bailed out by taxpayers.

Rival firms argued the sale was unfair, but the High Court dismissed the case.

In a ruling on Friday, Lord Justice Singh and Mr Justice Foxton said allegations by the rival suppliers were not “reasonably arguable”.

The judges said the government could lawfully conclude that the Bulb bidding process was “open, non-discriminatory and competitive”.

They added that ministers and officials could “treat the only bid which had emerged from the process as a fair reflection of the value which the market placed on Bulb’s business in the prevailing circumstances”.

The judges also said it was open to ministers to find that “other options were inferior to proceeding with the Octopus bid, involving significant execution risks and higher forecast costs”.

Following the ruling, Octopus said the High Court’s findings were “clear” in that the firm “paid a fair price for Bulb in an open and competitive process”.

“It’s clear that the case was a desperate attempt by those organisations to defend their waning market positions against a more efficient and customer-focused rival,” the company said.

“Fair play won. After more than a year of uncertainty, it’s a huge relief for Bulb’s employees and customers and good news for taxpayers,” added Octopus founder and chief executive Greg Jackson.

Centrica, the parent company of British Gas, said the ruling was “disappointing”, while Eon chief executive Michael Lewis said the company remained “concerned about the amount of taxpayers’ money that has been used to subsidise the deal”.

The three major suppliers previously claimed the government’s handling of an “unfair sale process” led to decisions “to commit billions of pounds of taxpayer money to facilitate the acquisition of a failed business” by Octopus Energy. They also alleged the decision-making process was “flawed and unlawful”.

Both Centrica and Eon said they would consider their next steps, but it is understood Scottish Power will not seek to appeal against the ruling.

A Department for Energy Security spokesperson welcomed the judgment.

“The court has confirmed the robustness and legality of the Secretary of State’s actions in respect of the sale and administration of Bulb,” they added.

The Office for Budget Responsibility (OBR) previously estimated that the rescue of Bulb could cost tax payers up to £6.5bn – making it the biggest bailout since the bank rescues during the 2008 financial crisis. However, in March the OBR revised this down to £3bn due to wholesale energy prices dropping.