Britons worry that the burgeoning Princess Diana memorabilia industry will cheapen her image

By HELEN GIBSON /LONDON

ost-Diana Britain remains raw and touchy about its bereavement. Nine months after her tragic death, the Princess of Wales is still generating public argument, family rifts, excited newspaper debate and even lawsuits--just as she did in her lifetime. The big difference is that the current furores are not about what Diana is doing, but about what others are doing in her memory.

There is much agonizing by her family, politicians and everyone else over the matter of good taste, as a Diana death industry flourishes and vast sums are raised in her name for charity. Is Diana's memory being cheaply exploited, is her dignity being trammeled, and the really big worry: Is this what Diana would have wanted?

The irony is that no one is quite sure how to answer that question. The unstuffy Diana, who enjoyed hamburgers and lent a high profile at Gianni Versace's funeral, often surprised her public. A Diana mug or doll deemed tacky by the arbiters of taste might well have been happily tolerated by the People's Princess. And so the arguments run on, from wrangling about what the national memorial should be, to worries that Diana's brother, Earl Spencer, might be creating a sort of Graceland with his Diana tours at Althorp, the family home.

For those other guardians of her good name, the nine trustees of the Diana, Princess of Wales Memorial Fund, the main concern is how to regulate the worldwide commercial memorabilia industry while still maximizing the charitable contributions offered by would-be Diana merchandisers. After her death, the hastily set-up fund moved quickly to acquire exclusive intellectual property rights to her image, name and likeness from her estate. It hasn't stopped illicit commercial exploitation, but the fund receives 200 applications a week for merchandising rights to everything from Diana slippers to car seatbelts and breathalyser kits.

Despite their impeccable credentials, the Fund's trustees, who include Diana's sister Lady Sarah McCorquodale and her former divorce lawyer Anthony Julius, have run into criticism themselves. In March, containers of Flora margarine appeared on supermarket shelves bearing Diana's signature--with the approval of the abashed trustees. At the same time, Diana lottery scratchcards surfaced, again with fund approval. No matter that the companies involved donated huge sums to the memorial fund, many felt that Diana's memory was not well served by scratchcards and margarine. "We got it wrong," admitted trustee Vivienne Parry, a broadcaster, after the margarine storm.

"We're damned if we do, and damned if we don't," says Mischon's Jonathan Cameron, emphasizing the fund's moral duty to collect for charity. In fact, they do that task well, although the public itself has needed no prompting. A check arrived at Kensington Palace just hours after Diana's death and so far the account totals $76 million, around half from sales of the Elton John recording of Candle in the Wind, the song he performed at her funeral.

Yet there could be even more--the memorabilia industry is vast. Said Washington-based Alicia Mundy of Adweek magazine to BBC TV's Panorama,"Diana basically right now is a cottage industry in the United States. She is worth the economy of a small Third World nation..." But the industry requires careful attention to discourage unapproved merchandizing. Last week the fund fired legal warning shots in the form of a lawsuit in a Los Angeles court against Franklin Mint Ltd., claiming the company had failed to gain approval for its Diana dolls. Franklin Mint insisted it was in "full compliance with all U.S. and international laws."

Earl Spencer has also promised money for the fund when his various Diana memorial plans get off the ground at Althorp. After a rock concert, he will open Althorp's gates on July 1 for two months to around 150,000 visitors, whose tour will include a look at Diana's school lunchbox and wedding dress in a converted stable block. How much of the entrance fees will go to charity and how much ploughed back into Althorp to pay for the exhibition renovations has not yet been disclosed, although Spencer has promised to make his accounts public.

When all is said and done, Diana in life greatly enjoyed being the center of attention. She might feel all the agonizing and interest surounding her memory is the best tribute she could have.