* Jackson's right breast briefly exposed during 2004 Super Bowl
* Chief Justice says wardrobe malfunction strains credulity
* CBS says it is gratified episode is finally over
By James Vicini
WASHINGTON, June 29 (Reuters) - The U.S. Supreme Court on Friday let stand a lower court decision to throw out a federal agency's $550,000 indecency fine against CBS Corp for airing singer Janet Jackson's "wardrobe malfunction" during the 2004 Super Bowl broadcast.
Jackson's right breast was briefly exposed to almost 90 million TV viewers after singer Justin Timberlake ripped off part of her bustier during a halftime show performance. CBS was fined $27,500 for each of the 20 stations it owned.
The justices, in a brief order, rejected an appeal by the Federal Communications Commission (FCC), declining to review a ruling by a U.S. appeals court based in Philadelphia that held the FCC had acted arbitrarily and capriciously in imposing the fine.
CBS said in a statement that it was "gratified to finally put this episode behind us. It's been more than eight years since we expressed deep regret for the Super Bowl halftime show."
The company said, "At every major turn of this process, the lower courts have sided with us. And now that the Supreme Court has brought this matter to a close, we look forward to the FCC heeding the call for the very balanced enforcement which was the hallmark of the commission for many, many years."
The Supreme Court rejected the FCC's appeal in the CBS case after its June 21 ruling in two separate cases that went against the FCC's crackdown on broadcast profanity and nudity. It unanimously ruled the FCC standards were vague and the agency had failed to give fair notice of its indecency policy change.
The high court's ruling involved 2002 and 2003 awards shows on News Corp's Fox television network when singer Cher blurted out an expletive and actress Nicole Richie used two expletives.
The justices in a second case overturned $1.21 million in fines imposed by the FCC over a seven-second shot of a woman's nude buttocks on a 2003 "NYPD Blue" episode on Walt Disney Co's ABC network.
The FCC stepped up its indecency crackdown after the Janet Jackson incident, which drew half a million complaints to the agency.
Chief Justice John Roberts agreed with the denial of the appeal. But he wrote briefly and said that even if the appeals court was wrong in its ruling in the CBS case, the FCC has clarified its indecency policy since the Janet Jackson incident.
"It is now clear that the brevity of an indecent broadcast - be it word or image - cannot immunize it from FCC censure," Roberts wrote.
He said Timberlake and Jackson "strained the credulity of the public by terming the episode a 'wardrobe malfunction' and added, "As every school child knows, a picture is worth a thousand words, and CBS broadcast this particular picture to millions of impressionable children."
The Supreme Court case is FCC v. CBS Corp, No. 11-1240.