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Smylex was Joker's codename for any of his poisoned products that, when paired in specific combination, would cause their victims to begin laughing uncontrollably, and then fall down, with their facial muscles pulled taut in a rictus grin. It could also be processed in a gaseous state.
The mayor of Gotham City orders District Attorney Harvey Dent and Police Commissioner James Gordon to increase police activity and combat crime in preparation for the city's bicentennial. Reporter Alexander Knox and photojournalist Vicki Vale begin to investigate reports of a vigilante nicknamed "Batman", who is targeting the city's criminals.
Mob boss Carl Grissom, who has already been targeted by Dent, discovers his mistress is involved with his second-in-command, Jack Napier. With the help of corrupt policeman Max Eckhardt, Grissom sets up Napier to be murdered during a raid at the Axis Chemicals plant. During the ensuing shootout, Napier kills Eckhardt, after which Batman suddenly appears. The two struggle, and Napier is accidentally knocked into a vat of chemical waste. Batman flees, and Napier is thought to be dead.
Batman is in actuality Bruce Wayne, a billionaire industrialist who, as a child, witnessed his parents' murder at the hands of a mugger. Bruce meets and falls for Vicki at a fundraiser, and the two begin a relationship. Meanwhile, Napier survives the accident, but is horribly disfigured with chalk-white skin, emerald-green hair and a permanent ruby-red grin. Driven insane by his reflection, he reinvents himself as "The Joker", kills Grissom and usurps his criminal empire.
The Joker begins to spread terror in the city, first by lacing hygiene products with a deadly chemical known as "Smilex", which causes victims to laugh to death when used in certain combinations. The Joker then sets a trap at the Gotham Museum of Art for Vicki, and he and his henchmen vandalize the surrounding works of art. Batman arrives and rescues Vicki, and the pair escape in the Batmobile. Batman gives information about Smilex to Vicki so she can warn the city via Gotham newspapers about the poisoned products.
Bruce meets with Vicki at her apartment, prepared to tell her that he is Batman. They are interrupted by the Joker, who asks Bruce, "Have you ever danced with the devil by the pale moonlight?" before shooting him. Bruce, who was wearing body armor, escapes, and recollects that the man who killed his parents asked him the same question; he realizes that the Joker killed his parents. Vicki suddenly appears in the Batcave, having been let in by Bruce's butler, Alfred Pennyworth. After avouching himself to Vicki, Bruce—as Batman—leaves to destroy the Axis Chemical plant. Meanwhile, the Joker lures the townspeople to a nighttime parade with a promise to give away $20 million in cash. When the citizens arrive, however, he attacks them with Smilex gas spewing it from his giant parade balloons. Batman arrives on the scene and saves Gotham City from the attack using the Batwing, but the Joker kidnaps Vicki and takes her to the top of a cathedral.
Batman pursues the two, and at the top of the dusty edifice, he and the Joker confront each other in single combat. When the Joker attempts an escape via a helicopter, Batman grapples the Joker's leg to a heavy stone sculpture, causing him to fall to his death. Commissioner Gordon unveils the Bat-Signal along with a note from Batman read by Harvey Dent, promising to defend Gotham whenever crime strikes again.
- The gas is based on the comics' "Joker Gas", and any other alias for the poison that left the Joker's victims with a postmortem rictus grin.
- In Sam Hamm's original script, the first time we see Smylex's effect (called Smylenol in the script) is on the two female models, who are only represented as cardboard cut-outs in Joker's commercial. The original scene has them in a bikini photo session with a photographer. The photographer urges them to smile more as he snaps away. The girls begin to giggle, which at first pleases the photographer. Soon, their giggles become laughter before becoming uncontrollable helpless hysterics, which has the photographer going from mild annoyance to complete horror as the exhausted girls expire from forced hilarity, with the ghastly Joker-like grins frozen on their faces.
- As it was originally intended, the death scene is much more protracted than the one with the female newscaster, depicting death by Smylex as a particularly agonizing, if mirthful, way to go.
- In the novel adaption of the film, the photographer is revealed to be Vicki Vale.