Especially if it is long, it is permissible and appropriate for a report message to contain one or more embedded newlines.
If the calling routine conventionally inserts some additional prefix (such as ``Error: '' or ``;; Error: '') on the first line of the message, it must also assure that an appropriate prefix will be added to each subsequent line of the output, so that the left edge of the message output by the condition reporter will still be properly aligned.
(defun test () (error "This is an error message.~%It has two lines.")) ;; Implementation A (test) This is an error message. It has two lines. ;; Implementation B (test) ;; Error: This is an error message. ;; It has two lines. ;; Implementation C (test) >> Error: This is an error message. It has two lines.