The Justice Department has dropped one of the longest-running and most controversial pornography prosecutions of the Reagan-Bush years.

It is also reconsidering the equally controversial tactics employed in the past by the government in pursuit of businesses distributing allegedly obscene materials. The Reagan-Bush approach involved threatening businesses with indictments in numerous jurisdictions in order to extract agreements to stop distribution of such materials. The theory was that the mere expense of defending themselves in so many places at once would encourage plea bargains by the businesses.

Three federal courts, as well as civil liberties organizations, have denounced the tactic as a form of harassment, sweeping non-obscene materials protected by the First Amendment into enforcement actions along with unprotected obscenity.

Among the targets of these "multi-district" prosecutions is P.H.E. Inc., one of the nation's largest distributors of sexually explicit films, magazines and books. The Bush administration Justice Department brought criminal charges against the company in Utah, though the business was operated from North Carolina. The government had been pursuing P.H.E., also known as Adam & Eve, since 1986.

P.H.E. sued in federal court in the District of Columbia to stop the government's tactic, and during a hearing on that suit last week, a Justice Department lawyer announced that it had dropped the Utah obscenity indictment against the firm.

Thomas W. Millet, a lawyer with the department's civil division, also said that an investigation underway against P.H.E. in Kentucky would be dropped. A single probe of P.H.E. being conducted by federal prosecutors in Alabama, he said, would continue.

The multi-district approach was the invention of Reagan administration prosecutors. It was spearheaded by a unit made up in part of lawyers who had a special enthusiasm for obscenity cases. Some had been recruited from an anti-obscenity organization called Citizens for Decency Through Law.

"The department has the existing policy on multiple prosecutions for obscenity cases under review," Millet said during last week's hearing. "And it is anticipated that, within the near future, that policy will be changed and that the policy will no longer encourage multiple prosecutions in obscenity cases."

The department's U.S. attorney's manual had always permitted the selective use of multi-district prosecutions, but said it was a disfavored tactic except in serious cases. To facilitate the Reagan administration's anti-obscenity campaign, however, the department rewrote that section of the manual in 1987 so that the tactic was "encouraged" in obscenity cases.

The policy review comes on the eve of the trial of P.H.E.'s civil suit set to begin before U.S. District Judge Joyce Hens Green Dec. 6.

Millet, seeking to delay the trial, argued that a new policy under consideration by the department that would restrict the use of multi-district prosecutions in obscenity cases would make the P.H.E. case moot. He noted, however, that the policy has not yet been approved by senior officials.

Initially, the multi-district prosecution tactic was successful against smaller distributors who signed plea agreements rather than fight the same federal criminal case in several jurisdictions.

In an article that examined the tactic in a series of Washington Post reports in January, former Utah U.S. attorney Brent Ward, one of the chief advocates of the tactic, argued that it was not extreme and not unconstitutional. "I would call it aggressive," he said. "It was a measured and moderate response to a nationwide problem. . . . It has been one of the most successful prosecution strategies in the history of the Department of Justice."

P.H.E. and one other distributor fought back on the grounds that the tactic is an unconstitutional abridgement of First Amendment rights. An injunction against multiple prosecutions was issued in 1988 by U.S. District Judge Thomas Penfield Jackson who called the tactic "annihilation by attrition." In 1990 Green ruled that the evidence presented by P.H.E. showed a "concerted effort by the {Justice Department}, through harassment and threats of multiple prosecutions to suppress . . . constitutionally protected activities."

When P.H.E. was indicted in Utah and appealed to the 10th U.S. Circuit Court of Appeals, that panel ruled in May 1992 against the government and denounced a "persistent and widespread campaign to coerce" individuals "into surrendering their First Amendment Rights."

Justice Department spokesman Carl Stern said that the department is reconsidering the policy because "being on the losing end of a couple of injunctions concentrates the mind wonderfully."