Google is close to reaching a settlement with the Justice Department over allegations it made hundreds of millions of dollars by accepting advertisements from online pharmacies that break US law, The Wall Street Journal reported on Thursday.

The Internet giant disclosed earlier this week that it had set aside $500 million in anticipation of the results of a US government investigation into "the use of Google advertising by certain advertisers."

Google did not provide further details in the filing with the US Securities and Exchange Commission (SEC).

"As this is a legal matter, we're not commenting on it," Google said in response to an AFP inquiry.

But the Journal, citing "people familiar with the matter," said it concerned an investigation into whether Google had knowingly accepted ads from online pharmacies based in Canada and elsewhere that violated US law.

"It's unclear whether those online drugstores were alleged to have sold counterfeit or expired drugs, whether they didn't require a valid doctor's prescription, or both," the newspaper said.

The Journal said a $500 million payment "would rank high among the criminal or civil penalties paid by companies in disputes with the US government."

In 2007, Google, Microsoft and Yahoo! agreed to pay a combined $31.5 million fine to settle allegations they had accepted ads from illegal gambling sites, the newspaper said.