Step 1:
Government restricted direct advertising of liquor and tobacco products due to harmful health effects.
Step 2:
Companies started promoting products like soda, water, music CDs etc. using the same brand name.
Step 3:
• Assertion is correct
• Reason is also correct
• Reason properly explains the reaction of manufacturers
Step 4:
Hence, the correct answer is:
\[
\boxed{\text{(1)}}
\]