Sri Lanka’s rapidly growing e-commerce sector continues to operate without a comprehensive regulatory framework, leaving consumers vulnerable and eroding trust in the digital marketplace, according to the State of the Economy 2025 report by the Institute of Policy Studies (IPS).
Despite the surge in online trade, the report highlights that the country’s e-commerce regulations remain fragmented and outdated. Gazette Notification No. 2332/15, issued in 2022 under the Consumer Affairs Authority Act, introduced only basic disclosure requirements for online sellers but failed to address crucial issues such as transaction security, digital contracts, product liability, and intellectual property protection.
A key gap identified is the absence of legal accountability for e-commerce platforms and intermediaries. The report notes that marketplaces like Daraz and social media platforms such as Facebook and Instagram are not required to verify sellers or ensure adherence to consumer protection standards. As a result, these platforms profit from online transactions without being held responsible for misconduct by third-party vendors.
The IPS also points to the unregulated nature of Sri Lanka’s informal digital economy, where a significant share of e-commerce occurs on platforms like Facebook Marketplace and WhatsApp. Many small-scale entrepreneurs operating online are unregistered and fall outside the scope of existing regulations, widening compliance gaps and limiting oversight.
Cross-border online shopping adds further complications. With more Sri Lankan consumers purchasing from overseas sellers, the absence of clear rules on jurisdiction, dispute resolution, and consumer protection in international transactions leaves buyers exposed to fraud, counterfeit goods, and undelivered orders.
The think-tank also warns that the current system lacks a dedicated online dispute resolution mechanism, describing existing channels as slow and unsuited for the digital era. It calls for a “swift, affordable, and accessible” system to handle consumer complaints efficiently.
To fully realise the potential of Sri Lanka’s digital economy, IPS urges policymakers to close regulatory gaps and strengthen digital financial literacy. “Building public trust in digital platforms requires not only effective regulation but also efforts to enhance financial awareness and reduce overreliance on cash transactions,” the report concludes.
