SL’s e-commerce rules still playing catch-up

IPS warns of widening gaps

• Says despite boom in online trade, the regulatory framework governing e-commerce in Sri Lanka remains fragmented and underdeveloped
• Currently, no legislation exists regarding the functionality of e-commerce marketplaces or social media platforms to examine vendors or ensure compliance with consumer protection standards
• Many micro-entrepreneurs are unregistered and fall outside the regulatory purview since the Gazette implicitly assumes a formal business structure
• Lack of standardised online dispute resolution mechanisms exacerbates consumer vulnerability
• Notes existing systems are “sluggish, cumbersome, and ill-suited for the digital environment”

By Shabiya Ali Ahlam

Sri Lanka’s fast-expanding e-commerce sector is currently operating in a policy vacuum as critical regulatory gaps undermine consumer protection, transparency, and trust in the digital marketplace.

Despite the boom in online trade, the regulatory framework governing e-commerce in Sri Lanka remains fragmented and underdeveloped, according to the recently launched State of the Economy 2025 report by the Institute of Policy Studies (IPS).

It pointed out that while Gazette Notification No. 2332/15, issued in 2022 under the Consumer Affairs Authority Act, introduced basic disclosure requirements for online vendors, it remains “largely procedural and does not adequately address critical areas such as transaction security, digital contracts, product liability, or intellectual property rights.”

A major concern is the absence of legal obligations for digital platforms and intermediaries. 

“Currently, no legislation exists regarding the functionality of e-commerce marketplaces (e.g., Daraz) or social media platforms (e.g., Facebook, Instagram) to examine vendors or ensure compliance with consumer protection standards,” the report noted. 

According to the think-tank, the result is “a regulatory loophole without safety nets wherein those operating via such platforms profit from facilitating transactions, but are not held accountable for third-party seller misconduct.”

The report also put the spotlight on the sprawling informal digital economy, where a large portion of e-commerce activity in Sri Lanka also occurs, mainly through platforms such as Facebook Marketplace and WhatsApp.” 

Many micro-entrepreneurs are unregistered and fall outside the regulatory purview since the Gazette implicitly assumes a formal business structure. This exclusion not only limits the coverage of legislation but also perpetuates compliance gaps within the digital marketplace,” IPS said. Meanwhile, cross-border trade presents its own minefield. 

With local consumers increasingly buying from international sellers, IPS cautioned that the absence of regulations governing jurisdiction, dispute resolution, and consumer redress in transnational transactions leaves them vulnerable to fraud, counterfeits, and non-fulfilment of orders. 

“The current framework fails to provide sufficient clarity on the applicability of local consumer protection laws in cross-border contexts,” the report highlighted.

Equally troubling is the lack of an effective dispute resolution system. IPS observed that the lack of standardised online dispute resolution mechanisms exacerbates consumer vulnerability and noted that existing systems are “sluggish, cumbersome, and ill-suited for the digital environment.” 

It stresses the urgent need for “swift, low-cost, and easily accessible channels for handling complaints”. The absence of a dedicated platform deters consumers from seeking justice and erodes confidence in online marketplaces, the IPS cautioned.

The IPS calls for decisive policy action to close these gaps and harness the digital economy’s potential. 

“To foster an inclusive and resilient digital economy in Sri Lanka, it is imperative to prioritise enhancing digital financial literacy, awareness, and adoption across all segments of society,” the report recommends.

“…strengthening financial literacy is essential to empowering individuals to make informed financial decisions, reducing dependence on cash, and fostering public trust in digital platforms,” it added.