(Bloomberg) -- Centrica Plc’s British Gas and a group of rival energy firms lost a court challenge against the UK government’s decision to sell collapsed firm Bulb Energy Ltd. 

Along with Iberdrola SA’s Scottish Power and EON SE, British Gas challenged the lawfulness of the government’s decision-making process in the transaction, arguing that the buyer Octopus Energy Ltd. received special treatment. Lawyers said that there were “serious flaws” in the subsidy process that granted Octopus government support for buying Bulb out of special administration last year.

Bulb collapsed in 2021 when wholesale prices spiked above the regulator’s price cap, forcing it to sell energy at a loss. The UK government, which supported Bulb in the biggest bailout since the financial crisis, said it approved the deal with Octopus in order to protect consumers and taxpayers. 

Judge Rabinder Singh and Judge David Foxton threw out the case on Friday saying that the application was refused due to “undue delay” as the proceeding was not brought promptly enough. 

However, both judges said that had it not been for the delay, they would have still refused the application on both the unlawfulness allegations and the subsidy control grounds.

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

Scottish Power declined to comment. 

“We believe that the way the deal was structured creates serious risk for taxpayers and energy consumers and will distort the energy market,” said a Centrica spokesperson. “We will review the judgment carefully and consider our options.”

Michael Lewis, EON’s UK chief executive officer, said the firm is considering its next steps and that “it’s absolutely correct that any use of public money to help a private company grow in this way should be thoroughly scrutinized.”

(Updates with a comment from EON UK CEO in the finalparagraph)

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